Markets turn to Trump for clarity

January 11, 2017

The rising uncertainty and growing unease ahead of Wednesday’s news conference by President-elect Donald Trump has left financial markets on high alert. Global stocks could be pressured further by depressed oil prices while investor jitters should limit upside gains today. Although Asian shares were mostly positive on Wednesday, there is a threat of European markets falling victim to risk aversion amid the anxiety. Wall Street may turn to Trump for further clarity this evening on how his fiscal policies could boost US economic growth. With Donald Trump already labelled as a renowned market shaker, market participants should keep diligent and be prepared to expect the unexpected.

Sterling remains vulnerable

There is a risk of the hard Brexit fears becoming the dominant theme that ensures Sterling remains depressed for prolonged periods. Although UK economic data continues to display resilience against the Brexit turmoil, the persistent Brexit induced uncertainty has effectively dented investor attraction towards the Sterling. Investors may direct their attention towards the UK manufacturing production report which may provide additional clarity on how the industry has fared against Brexit. While a positive manufacturing production figure may provide the Pound bulls with a temporary lifeline in the short term, sellers may exploit this opportunity to install renewed rounds of selling. The heightened fears over the UK experiencing a rough exit from the European Union have made bears ruthless this week with sellers eyeing 1.2100 and 1.2000 respectively on the GBPUSD.

Currency spotlight – EURUSD

When dealing with the EURUSD it’s all about the divergence in monetary policy between the Federal Reserve and European Central Bank. This currency remains fundamentally bearish and technicals on the daily charts also fulfil the prerequisites of a downtrend. Uncertainty and political risks in Europe should subdue the Euro while prospects of higher US rates have made the Dollar king. Technical traders could exploit the breakdown below 1.0500 to attack the EURUSD back towards 1.0350.

Commodity spotlight – Gold

Gold edged higher during early trading on Wednesday as uncertainty ahead of Trump’s news conference attracted investors to safe-haven investment. A touch of Dollar weakness has also provided some inspiration for bullish investors to send prices higher towards $1188 as of writing. Although the yellow metal has the ability to experience further short term gains depending on the outcome of today’s news conference, the bias still points to the downside. Gold remains gripped by rate hike expectations in the medium to longer term with the current technical bounce seen as an opportunity for longer term bears to attack.

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